There are four different types of orders:

  • Market order - this order is designed to be executed immediately, at the current market price - no price is specified on the order.

  • Limit order - this order does specify the price desired; however, there is no guarantee that the order will be filled. There are two types of limit orders:
    • Buy limit order - this order is entered at a price below the current market price (since it would not make sense to specify a higher-than-market price!).

    • Sell limit order - this order is placed above the current market price.

  • Stop order - this order is used to trigger an execution only if the market reaches a certain level; when this limit is reached, the stop order becomes a market order. As a result, there is no way to predict the actual price the security will receive. As with limit orders, there are two types:
    • Buy stop order - these are used to limit losses on short stock positions and are always placed above the current market price and filled only if the market rises.

    • Sell stop order - these are used to limit losses on long stock positions and are always placed below the current market price and filled only if the market falls.


Look Out!
Note that stop orders become market orders once the stop price has been reached, but there is no guarantee that the market price at execution will be close to the stop price. For example, an investor could place a sell stop order at 45 when the market is at 50; if the market drops quickly, the stop could be triggered at 45 but executed at 42.


  • Stop-limit order - this order is used to ensure that a specific price is received, but the order is only placed when a specific stop price is reached. The stop price and the limit price do not need to be the same. However, there is a risk that the stop price could be reached, but the market never reaches the limit price. In that case, the order will never be filled.


Account Types

Related Articles
  1. Trading

    Which Order To Use? Stop-Loss Or Stop-Limit Orders

    Stop-loss and stop-limit orders can provide different types of protection for investors seeking to lock in profits or limit losses. Investors need to know how each type of order works to know ...
  2. Trading

    Protect Yourself From Market Loss

    There are several simple strategies you can use to protect yourself from downside risk.
  3. Investing

    Narrow Your Range With Stop-Limit Orders

    With stop-limit orders, buyers protect themselves from prices too high for their tastes.
  4. Trading

    The Basics Of Trading A Stock

    Taking control of your portfolio means knowing what orders to use when buying or selling stocks.
  5. Trading

    How To Place Orders With A Forex Broker

    Learn how to set each type of stop and limit when trading currencies.
  6. Investing

    Explaining Market Orders

    A market order is the most common order used to purchase a financial security.
  7. Investing

    Understanding Buy Stop Orders

    A buy stop order is an order to buy a stock at a specific price above its current market price.
  8. Investing

    Stop Loss Order Strategy

    A stop loss order is an order placed with a broker to sell a stock immediately if it drops to a certain price. It's a common way for investors to protect themselves from the possibility of a ...
  9. Trading

    Understanding Order Execution

    Find out the various ways in which a broker can fill an order, which can affect costs.
Frequently Asked Questions
  1. Depreciation Can Shield Taxes, Bolster Cash Flow

    Depreciation can be used as a tax-deductible expense to reduce tax costs, bolstering cash flow
  2. What schools did Warren Buffett attend on his way to getting his science and economics degrees?

    Learn how Warren Buffett became so successful through his attendance at multiple prestigious schools and his real-world experiences.
  3. How many attempts at each CFA exam is a candidate permitted?

    The CFA Institute allows an individual an unlimited amount of attempts at each examination.Although you can attempt the examination ...
  4. What's the average salary of a market research analyst?

    Learn about average stock market analyst salaries in the U.S. and different factors that affect salaries and overall levels ...
Trading Center